Video: why the New Deal was a failure

December 13, 2011

Obama’s first term (1) saw a full-throated return to Keynesian economics — massive increases in government spending, debt, and (if they had gotten their way) taxes to try to stimulate the economy. As we all know, it failed miserably.

For the 2012 election, Obama has doubled-down on the Keynesianism to openly advocate policies of higher taxation, more regulation, more government-directed redistribution of income, and, yes, even more flushing tax money down the toilet stimulus spending. Obama and his people claim that this worked before under FDR, so we should do it again.

Wrong. The history of the New Deal (and its predecessor under Hoover) is almost the opposite of what we’ve been taught in school. The biggest misrepresentation of all is that it worked.

It didn’t. The New Deal was a failure that only made the misery worse, as this video from the Center for Freedom and Prosperity argues:

The real lesson we should take from the economic policies of the Hoover and FDR administrations is that big-government, statist interventions don’t work. Instead, they exacerbate the problem by hindering the self-healing properties of a free market.

In 2012, we have a choice between a party that advocates economic policies that are an empirical failure — the Democrats and the their Hoover/FDR interventionism– and one (2) offering those shown to be an empirical success, the policies of Ronald Reagan and, yes, Warren Harding.

For most voters (3), once armed with the facts, the choice becomes clear and easy.

RELATED: For more on the truth about Hoover, FDR and the New Deal, let me recommend the following:

  • Ohanian and Cole, “New Deal Policies and the Persistence of the Great Depression: A General Equilibrium Analysis” (Journal of Political Economy, 2004) While behind online subscriber walls, you should be able to find it at any university library.
  • Amity Shlaes, The Forgotten Man
  • Jim Powell, FDR’s Folly

Footnotes:
(1) And, to be fair, the last year of Bush’s second term.
(2) Sure, the Republicans have been far from perfect, and the eventual nominee himself may be tempted by big-government “solutions,” but they’re still a far sight better than the (Social) Demcorats.
(3) Other than a certain core that, for whatever reason, prefers to cling bitterly to their cherished myths and bad ideas and be infantilized wards of the state.

(Crossposted at Sister Toldjah)


Seven reasons why tax increases are not needed

May 4, 2011

The Center For Freedom and Prosperity has put out another of it’s “Econ 101″ videos, which cover various topics explaining why limited government, low tax, and controlled spending regimes work better than… Well, what we have now.

This video, narrated by Piyali Bhattacharya of Young Americans for Liberty, gives seven reasons why increasing taxes is a bad idea:

  1. Tax increases are not needed;
  2. Tax increases encourage more spending;
  3. Tax increases harm economic performance;
  4. Tax increases foment social discord;
  5. Tax increases almost never raise as much revenue as projected;
  6. Tax increases encourage more loopholes; and,
  7. Tax increases undermine competitiveness.

And here’s Piyali:

We should keep these in mind as the budget debates in Congress go forward.

via Dan Mitchell at Big Government, where he gives links to related videos you may be interested in.

(Crossposted at Sister Toldjah)


Four reasons why big government is bad government

February 8, 2011

Via Dan Mitchell, here’s another video from the Center for Freedom and Prosperity. This one explains why the growth of government is harmful to a nation’s prosperity:

Check out Mitchell’s post for some related interesting videos.

BTW: A message was making its way around Twitter last night; by “retweeting” it, one asks Speaker Boehner to post a live debt clock (like this one) in the House chamber. I like it.

(Crossposted at Sister Toldjah)


Why a flat tax is a good idea

January 31, 2011

I believe I’ve posted this before, but, since tax season is fast approaching with all its wrangling over this rule and that deduction, I thought it worthwhile to offer again. In it, the Cato Institute’s Dan Mitchell explains how a flat tax would work and why it would be better for the country than the current Byzantine system we have:

And, speaking of those Mitchell mentions who benefit from the current tax code, I’m sure the tax-prep industry would just hate this.

via International Liberty

(Crossposted at Sister Toldjah)


Want to save Social Security? Privatize it.

January 16, 2011

Everyone who hasn’t been hiding under a rock knows that the two main pillars of our social welfare system, Medicare and Social Security, are in big trouble and threaten to wreck the nation’s finances. With regard to Social Security, Dan Mitchell suggests the way to save the program is to let everyone have private accounts:

Mitchell mentions several countries that have had success privatizing their social pension system. Chile is just one example of a country where privatization has worked wonders. Isn’t it time we took a hard look at doing the same thing, instead of just demagoguing the issue?

RELATED: Jimmy Bise at The Sundries Shack says “We’ll fix Social Security Over Their Dead Bodies.” Take no prisoners.

(Crossposted at Sister Toldjah)


Why Keynesian economics is wrong

November 30, 2010

Progressive economics (and, sadly, the economics of some otherwise sensible Republicans) is based on the idea that, in an economic downturn, one relies on government spending to increase domestic consumption in order to stimulate the economy. Sadly, as the history of the 1930s, 1970s and, now, the early 21st century shows, that really doesn’t work. In this video from the Center for Freedom and Prosperity, the AEI’s Hiwa Alaghebandian explains how Keynesian economics, and thus the entire economic policy of the Obama administration, has it all backwards:

As her former internship supervisor, Dan Mitchell, writes:

The main insight of the mini-documentary is that Gross Domestic Product (GDP) only measures how national output is allocated between consumption, investment, and government. That’s useful information in many ways, but if we want more output, we should focus on Gross Domestic Income (GDI), which measures how national income is earned.

Focusing on GDI hopefully would lead lawmakers to consider ways of boosting employee compensation, corporate profits, small business income, and other components of national income. Focusing on GDP, by contrast, is misguided since any effort to boost consumption generally leads to less investment. This is why Keynesian policies only redistribute national income, but don’t boost overall output.

The analysis in this video also helps explain why Obama’s so-called stimulus was a flop. The White House genuinely seemed to think a bigger burden of government spending was going to create jobs, but the real-world numbers show higher joblessness.

The basic idea is that increased income leads to increased consumption, not the other way around. One would think this would be common sense, but that apparently assumes a level of economic literacy all too uncommon amongst our policy-makers.

LINKS: MEP Daniel Hannan sums it up in 11 words.

Via International Liberty

(Crossposted at Sister Toldjah)


Indexing the capital gains tax

September 21, 2010

Sounds like a snoozer of a topic, right?

Hey, wake up! It’s your money we’re talking about here!

That’s right. If you’re an investor (and everyone should be in some form, even in this lousy economic climate), then you’re being ripped off by the capital gains tax. Not only is it a form of double taxation that should be eliminated, but, even at the current relatively low rates, you still lose because of inflation. In fact, as this Center for Freedom and Prosperity video demonstrates, it is quite possible to pay taxes on a “gain” that is actually a loss:

It’s like getting mugged and then being forced to pay for the mugger’s cab fare. Some fun, eh?

More seriously, this kind of taxation eventually discourages investment, which hampers economic growth and job creation, something we just don’t need.


Econ 101: the perils of Moral Hazard

August 8, 2010

I’ve occasionally posted videos from the Center for Freedom and Prosperity, an ally or affiliate of the libertarian Cato Institute, that touch on aspects of economics and why government intervention in the free market often causes more problems than it solves. In this offering, the speaker discusses “moral hazard,” in which government interventions provide incentives for people to engage in irresponsible behavior:

What I like about this series is that it teaches economics by focusing on human behavior, rather than abstruse formulae and obscure jargon, and I recommend taking the time to watch them all.

(Crossposted at Sister Toldjah)


Evidence that big government hurts the economy

June 30, 2010

In this Center for Freedom and Prosperity video, Dan Mitchell provides graphic evidence that government growth beyond a certain point actually hurts a nation’s economic performance:

While Mitchell doesn’t explain why this is true (something he does in other videos), the reason seems clear: government spending is inherently wasteful as money is often diverted to sub-optimal, politically oriented  purposes (such as vanity airports and bridges to nowhere), and that money is not disciplined by market forces. In other words, national governments’ wasteful deployment of capital is not punished by those governments’ going out of business. Furthermore, this money is taken out of private hands and consequently is no longer available for productive uses such as investing, saving, and job creation.

That isn’t to say all government is bad. By providing open markets, the consistent rule of law, and a strong protection of property rights, government actually helps create the conditions for prosperity. Beyond that point, however, it becomes a parasite, sucking the lifeblood from its host, the private sector.

If Mitchell and other free-market economists are right (and I strongly suspect they are), then one of the best things the federal government could do would be to reduce federal spending from its current 40% of GDP to about 15-20 percent.  That, however, is something that will not happen under the Democrats, and I have to wonder if even a Republican government would have the courage to make the needed cuts, given all the political oxes that would have to be gored.

Probably not, until the national consensus itself changes. And that may not be as far off as you think.

(via International Liberty)


How the minimum wage costs jobs

June 14, 2010

In this video from the Center for Freedom and Prosperity, another of Dan Mitchell‘s former interns, Orphe Divounguy, gives us a lesson in how rising minimum wages, while seemingly good for the worker, actually kill job opportunities:

He makes several good points:

  • For workers with no real skills, for example, teenagers just entering the job market, a high minimum wage makes them not worth what the employer is required to pay them.
  • Minimum wages disproportionately hurt minorities, who often come from poor environments. Even if they’re willing to work to learn skill and prove themselves, the high minimum wage locks them out of the market.
  • A minimum wage makes some sense as a floor if it’s beneath the prevailing market wage, but a minimum wage higher than that inevitably leads to higher unemployment as the cost of labor gets beyond what an employer can afford.
  • Businesses aren’t charities. If a worker costs more than the revenue he generates, the employer won’t hire him.

I can’t imagine we’ll ever see a rollback or elimination of the minimum wage, however. Then again, these are not normal times and, with so many people unemployed, perhaps enough people can be convinced.


Scary: deficits, debts and unfunded liabilities

May 16, 2010

In this Center for Freedom and Prosperity video, Kelly McDonough gives a primer in the problems we face not just from deficit spending and public debt, but the horrendous amount of unfunded future liabilities (such as Social Security and Medicare) Washington has burdened us with:

Excuse while I crawl under my blanket to hide. Nailbiting


Get rid of the capital-gains tax

May 3, 2010

As an investor (and one who believes that private investment is the best way for Americans to secure their retirement), I’ve never liked the capital-gains tax.  Dan Mitchell presents another Center for Freedom and Prosperity video on why the CG tax should be eliminated:

Dan offers six reasons, and I think they’re all sound.

LINK: More at Hot Air.


Taxes: the cost of compliance

April 12, 2010

Tax Day is coming, and in its honor we have another video from the Center for Freedom and Prosperity, in which Hiwa Alaghebandian discusses the enormous amounts it costs our economy just to comply with IRS regulations:

Either a flat income tax or a VAT as a replacement for the income tax seems more and more attractive all the time.

(via Dan Mitchell)

LINKS: More at Hot Air.


The Flat Tax: Good for America, Bad for Washington

March 29, 2010

Dan Mitchell of the Cato Institute and the Center for Freedom and Prosperity has just released a video explaining why he believes a flat tax would be better for the country and fairer overall:

Here’s what he says about the “progressive taxes are more fair” argument favored by the left-liberals:

There are two big hurdles that must be overcome to achieve tax reform. The first obstacle is that the class-warfare crowd wants the tax code to penalize success with high tax rates. That issue is addressed in the video in a couple of ways. I explain that fairness should be defined as treating all people equally, and I also point out that upper-income taxpayers are far more likely to benefit from all the deductions, credits, exemptions, preferences, and other loopholes in the tax code.

You can read the other reason in his article at Big Government.

Personally, I’m drawn to the idea of a national sales tax or VAT as a replacement for the income tax. It makes sense to tax consumption instead of productive work, though I recognize some fear that it would be a hidden tax that fuels government growth.

Regardless, I think we can all* agree that the current tax system is a nightmare that needs to end.

*(Except for Democrats progressive statists and the tax-prep industry.)

LINKS: More at Hot Air.


If even Sweden doesn’t want to be like Sweden…

March 12, 2010

Why then are President Obama and his progressive statist allies trying to force the social-democratic model that Sweden embodies down our throats? A Swedish economist with the Center for Freedom and Prosperity explains how Sweden became prosperous, how it wrecked that prosperity, and what it is doing to regain it:

I’m tempted to write something like “President Obama, take note,” but The Won really isn’t interested; like all good statists, he knows what’s best for the rest of us, whether we like it or not.

(via Dan Mitchell)


The problem is the spending

December 15, 2009

Dan Mitchell of the Center for Freedom and Prosperity (associated with the Cato Institute) explains that the government’s fiscal problems are not so much a function of deficits or debt, but of politicians’ uncontrolled spending:

Best line: “You don’t cure an alcoholic’s drinking problem by giving him more beer, and you don’t fix a politician’s spending problem by giving him more money.”

(via Hot Air)


ObamaCare: A Red-Ink Train Wreck

November 11, 2009

A new video from Dan Mitchell and the Center for Freedom and Prosperity, explaining why both the House and Senate health-care reform bills would be a red-ink train wreck:

(via Big Government)


Don’t copy Europe’s mistakes

November 3, 2009

A new video from the Center for Freedom and Prosperity, this time featuring Eline van den Broek of the European Independent Institute, explains why the United States should not want to model any new health care reform on European socialized medicine and why less government is the preferred approach:


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